Aviat Networks Announces Fiscal Second Quarter 2014 Financial Results

    Aviat Networks Announces Fiscal Second Quarter 2014 Financial Results

PR Newswire

SANTA CLARA, Calif., Feb. 6, 2014

SANTA CLARA, Calif., Feb. 6, 2014 /PRNewswire/ --Aviat Networks, Inc.
(NASDAQ: AVNW), the leading expert in microwave networking solutions, today
reported financial results for the second quarter of fiscal year 2014, which
ended December27, 2013.

Financial Highlights for Q2FY14

  oRevenue at $85.8 million
  oBook to bill was above 1
  oGAAP Gross Margin at 24.8%; Non-GAAP Gross Margin at 24.9%
  oGAAP Operating Expense at $32.0 million; Non-GAAP Operating Expense at
    $30.4 million
  oGAAP Net Loss including discontinued operations of $(9.9) million, or
    $(0.16) per share
  oNon-GAAP Net Loss from continuing operations of $(9.4) million, or $(0.15)
    per share

A reconciliation of GAAP to non-GAAP financial measures for the fiscal second
quarter along with the accompanying notes is provided on Table 4.

"A slower-than expected investment cycle in Africa negatively impacted revenue
this quarter. While Aviat benefitted from new customer wins in Asia and Latin
America, our fiscal second quarter results are disappointing" said Michael
Pangia, president and CEO, Aviat Networks. "Last week we announced a
restructuring plan aimed at rapidly realigning our cost structure with near
term business conditions. This restructuring, combined with ongoing cost and
expense savings, will better position Aviat Networks for the near-term market
reality while continuing to position us for future opportunities."

GAAP Financial Results

For the second quarter of fiscal year 2014, revenue was $85.8 million,
compared with $129.0 million in the year-ago quarter. Aviat Networks reported
a net loss, including discontinued operations, of $(9.9) million, or $(0.16)
per share, compared with a net loss of $(5.3) million, or $(0.09) per share in
the year-ago quarter. Loss from continuing operations for the quarter was
$(10.2) million, or $(0.17) per share, compared with the loss from continuing
operations of $(5.0) million, or $(0.08) per share, in the year-ago quarter.
Revenue and results of operations from Aviat Networks' WiMAX business are
classified as discontinued operations for all periods presented.

Cash and cash equivalents were $64.7 million as of December27, 2013 compared
with $79.3 million as of the end of the prior quarter. The decrease in cash is
primarily due to a $13.2 million cash tax payment to a foreign
jurisdictionand capital spending for product introduction.

Non-GAAP Financial Results

Non-GAAP loss from continuing operations for the quarter was $(9.4) million,
or $(0.15) per share, compared with a non-GAAP income from continuing
operations of $6.4 million, or $0.10 per diluted share, in the year-ago
quarter.

The second quarter of fiscal year 2014 non-GAAP loss from continuing
operations excluded $1.7 million of pre-tax charges composed primarily of the
following:

  o$0.7 million for share-based compensation expense;
  o$0.3 million of restructuring charges;
  o$0.1 million for amortization of purchased intangibles; and
  o$0.6 million for transactional taxes assessments.

Fiscal second quarter 2014 Adjusted EBITDA was $(6.8) million, compared with
$8.6 million in the year-ago quarter. In addition to the $1.7 million of
pre-tax charges excluded from non-GAAP loss from continuing operations noted
above, fiscal second quarter 2014 Adjusted EBITDA also excludes $2.2 million
of pre-tax charges comprised of the following:

  o$2.1 million of depreciation and amortization on property, plant and
    equipment; and
  o$0.1 million of interest expense.

A reconciliation of GAAP to non-GAAP financial measures for the fiscal second
quarter along with accompanying notes is provided on Table 4.

Second Quarter Revenue by Region

Revenue in the North America region was $33.8 million in the second quarter of
fiscal 2014, compared with $41.4 million in the year-ago quarter.
International revenue was $52.0 million, compared with $87.6 million in the
year-ago quarter.

Outlook

Aviat Networks presently expects to return to non-GAAP profitability from
continuing operations in the first half of fiscal year 2015. Given limited
near-term visibility and the impact that the restructuring plan is going to
initially have on the results, Aviat Networks is not providing guidance for
the third quarter of fiscal year 2014.

Conference Call Details

Aviat Networks will host a conference call today at 4:30 p.m. Eastern Time to
discuss the company's financial results. Those wishing to join the call should
dial (480) 629-9712 or toll free at (877) 941-2068 access code 4662815 at
approximately 4:20 p.m. Eastern Time. A replay also will be available starting
approximately one hour after the completion of the call until February 13,
2014. To access the replay, dial (303) 590-3030 or toll free at (800) 406-7325
access code 4662815. A live and archived webcast of the conference call will
also be available via the company's Web site at
http://investors.aviatnetworks.com/events.cfm.

Non-GAAP Measures and Comparative Financial Information

Aviat Networks, Inc. reports information in accordance with U.S. Generally
Accepted Accounting Principles ("GAAP"). Management of Aviat Networks monitors
gross margin, research and development expenses, selling and administrative
expenses, operating income or loss, income tax provision or benefit, income or
loss from continuing operations, basic and diluted income or loss per share
from continuing operations, adjusted earnings (losses) before interest, tax,
depreciation and amortization ("Adjusted EBITDA") adjusted to exclude certain
costs, charges, gains and losses, on a non-GAAP basis for planning and
forecasting results in future periods, and may use these measures for some
management compensation purposes. These measures exclude certain costs,
expenses, gains and losses as shown on the attached Reconciliation of Non-GAAP
Financial Measures table. As a result, management is presenting these non-GAAP
measures in addition to results reported in accordance with GAAP to better
communicate underlying operational and financial performance in each period.
Management believes these non-GAAP measures provide information that is useful
to investors in understanding period-over-period operating results separate
and apart from items that may, or could, have a disproportionate positive or
negative impact on results in any given period. Management also believes that
these non-GAAP measures enhance the ability of an investor to analyze trends
in Aviat Networks' business and to better understand our performance.

Aviat Networks' management does not, nor does it suggest that investors
should, consider such non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with GAAP. Aviat
Networks presents these non-GAAP financial measures in reporting its financial
results to provide investors with an additional tool to evaluate its financial
performance. Reconciliations of these non-GAAP financial measures with the
most directly comparable financial measures calculated in accordance with GAAP
are included in the tables below.

About Aviat Networks

Aviat Networks, Inc. (NASDAQ: AVNW) is a leading global provider of microwave
networking solutions transforming communications networks to handle the
exploding growth of IP-centric, multi-Gigabit data services. With more than
750,000 systems installed around the world, Aviat Networks provides LTE-proven
microwave networking solutions to mobile operators, including some of the
largest and most advanced 4G/LTE networks in the world. Public safety,
utility, government and defense organizations also trust Aviat Networks'
solutions for their mission-critical applications where reliability is
paramount. In conjunction with its networking solutions, Aviat Networks
provides a comprehensive suite of localized professional and support services
enabling customers to effectively and seamlessly migrate to next generation
Carrier Ethernet/IP networks. For more than 50 years, customers have relied on
Aviat Networks' high performance and scalable solutions to help them maximize
their investments and solve their most challenging network problems.
Headquartered in Santa Clara, California, Aviat Networks operates in more than
100 countries around the world. For more information, visit
www.aviatnetworks.com or connect with Aviat Networks on Twitter, Facebook and
LinkedIn.

Forward-Looking Statements

The information contained in this document includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act and Section 27A of the Securities
Act, including the results of Aviat Networks' restructuring efforts and
ongoing cost and expenses savings and expectations regarding fiscal year
2015. All statements, trend analyses and other information contained herein
about the markets for the services and products of Aviat Networks, Inc. and
trends in revenue, as well as other statements identified by the use of
forward-looking terminology, including "anticipate," "believe," "plan,"
"estimate," "expect," "goal," "will," "see," "continue," "delivering," "view,"
and "intend," or the negative of these terms or other similar expressions,
constitute forward-looking statements. These forward-looking statements are
based on estimates reflecting the current beliefs of the senior management of
Aviat Networks. These forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statements. Forward-looking statements should
therefore be considered in light of various important factors, including those
set forth in this document. Important factors that could cause actual results
to differ materially from estimates or projections contained in the
forward-looking statements include the following:

  ocontinued price and margin erosion as a result of increased competition in
    the microwave transmission industry;
  othe impact of the volume, timing and customer, product and geographic mix
    of our product orders;
  oour ability to meet projected new product development dates or anticipated
    cost reductions of new products;
  oour suppliers' inability to perform and deliver on time as a result of
    their financial condition, component shortages or other supply chain
    constraints;
  ocustomer acceptance of new products;
  othe ability of our subcontractors to timely perform;
  ocontinued weakness in the global economy affecting customer spending;
  oretention of our key personnel;
  oour ability to manage and maintain key customer relationships;
  ouncertain economic conditions in the telecommunications sector combined
    with operator and supplier consolidation;
  othe timing of our receipt of payment for products or services from our
    customers;
  oour failure to protect our intellectual property rights or defend against
    intellectual property infringement claims by others;
  othe results of restructuring efforts;
  othe effects of currency and interest rate risks; and
  othe impact of political turmoil in countries where we have significant
    business.

For more information regarding the risks and uncertainties for our business,
see "Risk Factors" in our Form 10-K filed with the U.S. Securities and
Exchange Commission ("SEC") on September 23, 2013 as well as other reports
filed by Aviat Networks, Inc. with the SEC from time to time. Aviat Networks
undertakes no obligation to update publicly any forward-looking statement for
any reason, except as required by law, even as new information becomes
available or other events occur in the future.

Financial Tables to Follow:



Table 1
AVIAT NETWORKS, INC.
Fiscal Year 2014 Second Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                      Quarter Ended                 Two Quarters Ended
                      December27,    December 28,  December27,  December 28,
                      2013                          2013
                                      2012 ^(1)                   2012 ^(1)
                      (In millions, except per share amounts)
Revenue from product  $   85.8        $  129.0      $  179.2      $  244.0
sales and services
Cost of product       64.5            90.3          134.8         171.6
sales and services
Gross margin          21.3            38.7          44.4          72.4
Research and          9.4             9.8           19.1          19.1
development expenses
Selling and
administrative        22.2            23.7          44.4          47.0
expenses
Amortization of       0.1             0.1           0.2           0.2
intangible assets
Restructuring         0.3             0.2           4.8           0.5
charges
Operating income      (10.7)          4.9           (24.1)        5.6
(loss)
Interest income       0.1             0.2           0.1           0.5
Interest expense      (0.1)           (0.2)         (0.2)         (0.5)
Income (loss) from
continuing            (10.7)          4.9           (24.2)        5.6
operations before
income taxes
Provision for
(benefit from)        (0.5)           9.9           (0.3)         11.4
income taxes
Loss from continuing  (10.2)          (5.0)         (23.9)        (5.8)
operations
Income (loss) from
discontinued          0.3             (0.3)         0.4           (1.7)
operations, net of
tax
Net loss              $   (9.9)       $  (5.3)      $  (23.5)     $  (7.5)
Income (loss) per
common share, basic
and diluted:
Continuing            $   (0.17)      $  (0.08)     $  (0.39)     $  (0.10)
operations
Discontinued          $   0.00        $  (0.01)     $  0.01       $  (0.03)
operations
Net loss              $   (0.16)      $  (0.09)     $  (0.38)     $  (0.13)
Weighted average
shares outstanding,   61.8            60.0          61.3          59.7
basic and diluted
(1) Certain prior year period amounts are reclassified to conform to current
period presentation.



Table 2
AVIAT NETWORKS, INC.
Fiscal Year 2014 Second Quarter Summary
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                                   December27, 2013      June 28, 2013 ^(1)
                                   (In millions)
Assets
Cash and cash equivalents          $     64.7             $      90.0
Receivables, net                   75.8                   86.3
Unbilled costs                     35.9                   28.9
Inventories                        36.8                   35.0
Customer service inventories       14.8                   16.2
Other current assets               18.3                   17.9
Property, plant and equipment,     30.3                   28.8
net
Identifiable intangible assets,    0.6                    0.8
net
Other assets                       2.2                    1.9
                                   $     279.4            $      305.8
Liabilities and Stockholders'
Equity
Short-term debt                    $     6.0              $      8.8
Accounts payable                   45.7                   50.6
Advanced payments and unearned     28.9                   18.6
income, current
Accrued expenses and other         55.1                   53.1
current liabilities
Other long-term liabilities        14.8                   24.8
Stockholders' equity               128.9                  149.9
                                   $     279.4            $      305.8
(1) Certain prior year period amounts are reclassified to conform to current
period presentation.



Table 3
AVIAT NETWORKS, INC.
Fiscal Year 2014 Second Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                    Two Quarters Ended
                                                    December27,  December 28,

                                                    2013          2012 ^(1)
                                                    (In millions)
Operating Activities
Net loss                                            $  (23.5)     $   (7.5)
Adjustments to reconcile net loss to net cash used
in operating activities:
Amortization of identifiable intangible assets      0.2           0.5
Depreciation and amortization of property, plant    3.5           2.9
and equipment
Bad debt expense (recovery)                         (0.2)         2.0
Share-based compensation expense                    2.2           3.3
Charges for inventory write-downs                   1.1           3.3
Changes in operating assets and liabilities:
Receivables                                         10.8          (10.3)
Unbilled costs                                      (6.9)         9.1
Inventories                                         (2.6)         (2.5)
Customer service inventories                        1.0           0.6
Accounts payable                                    (4.6)         (13.0)
Accrued expenses                                    1.2           (5.0)
Advance payments and unearned income                9.3           11.4
Income taxes payable or receivable                  2.5           (1.2)
Reserve for uncertain tax positions and deferred    (14.9)        11.4
taxes
Other assets and liabilities                        3.3           (1.5)
Net cash provided by (used in) operating activities (17.6)        3.5
Investing Activities
Additions of property, plant and equipment          (5.4)         (3.6)
Net cash used in investing activities               (5.4)         (3.6)
Financing Activities
Payments on long-term debt                         (2.8)         (2.1)
Proceeds from share-based compensation awards       0.1           0.1
Payments on capital lease obligations               (0.1)         —
Net cash used in financing activities               (2.8)         (2.0)
Effect of exchange rate changes on cash and cash    0.5           0.9
equivalents
Net Decrease in Cash and Cash Equivalents           (25.3)        (1.2)
Cash and Cash Equivalents, Beginning of Period      90.0          96.0
Cash and Cash Equivalents, End of Period            $  64.7       $   94.8
(1) Certain prior year period amounts are reclassified to conform to current
period presentation.



AVIAT NETWORKS, INC.

Quarter Ended December27, 2013 Summaries

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE

To supplement the consolidated financial statements presented in accordance
with accounting principles generally accepted in the United States ("GAAP"),
we provide additional measures of gross margin, research and development
expenses, selling and administrative expenses, operating income or loss,
income tax provision or benefit, income or loss from continuing operations,
basic and diluted income or loss per share from continuing operations, and
adjusted earnings before interest, tax, depreciation and amortization
("Adjusted EBITDA"), adjusted to exclude certain costs, charges, gains and
losses, as set forth below. We believe that these non-GAAP financial measures,
when considered together with the GAAP financial measures provide information
that is useful to investors in understanding period-over-period operating
results separate and apart from items that may, or could, have a
disproportionate positive or negative impact on results in any particular
period. We also believe these non-GAAP measures enhance the ability of
investors to analyze trends in our business and to understand our performance.
In addition, we may utilize non-GAAP financial measures as a guide in our
forecasting, budgeting and long-term planning process and to measure operating
performance for some management compensation purposes. Any analysis of
non-GAAP financial measures should be used only in conjunction with results
presented in accordance with GAAP. Reconciliations of these non-GAAP
financial measures with the most directly comparable financial measures
calculated in accordance with GAAP follow.



Table 4
AVIAT NETWORKS, INC.
Fiscal Year 2014 Second Quarter Summary
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES ^(1)
Condensed Consolidated Statements of Operations
(Unaudited)
                Quarter Ended                               Two Quarters Ended
                December27,  % of      December   % of     December27,  % of      December   % of
                2013                    28,                2013                    28,
                              Revenue   2012 ^(2)  Revenue                Revenue   2012 ^(2)  Revenue
                (In millions, except percentages and per share amounts)
GAAP gross      $  21.3       24.8   %  $ 38.7     30.0  %  $  44.4       24.8   %  $ 72.4     29.7  %
margin
Share-based     0.1                     0.1                 0.1                     0.2
compensation
Warehouse
consolidation   —                       —                   0.2                     —
costs
Amortization
of purchased    —                       0.1                 —                       0.3
technology
Non-GAAP gross  21.4          24.9   %  38.9       30.2  %  44.7          24.9   %  72.9       29.9  %
margin
GAAP research
and             $  9.4        11.0   %  $ 9.8      7.6   %  $  19.1       10.7   %  $ 19.1     7.8   %
development
expenses
Share-based     —                       (0.5)               (0.2)                   (0.8)
compensation
Non-GAAP
research and    9.4           11.0   %  9.3        7.2   %  18.9          10.5   %  18.3       7.5   %
development
expenses
GAAP selling
and             $  22.2       25.9   %  $ 23.7     18.4  %  $  44.4       24.8   %  $ 47.0     19.3  %
administrative
expenses
Share-based     (0.6)                   (1.2)               (1.9)                   (2.3)
compensation
Transactional
taxes           (0.6)                   —                   (0.6)                   (0.6)
assessments
Non-GAAP
selling and     21.0          24.5   %  22.5       17.4  %  41.9          23.4   %  44.1       18.1  %
administrative
expenses
GAAP operating  $  (10.7)     (12.5) %  $ 4.9      3.8   %  $  (24.1)     (13.4) %  $ 5.6      2.3   %
income (loss)
Share-based     0.7                     1.8                 2.2                     3.3
compensation
Warehouse
consolidation   —                       —                   0.2                     —
costs
Amortization
of purchased    —                       0.1                 —                       0.3
technology
Transactional
taxes           0.6                     —                   0.6                     0.6
assessments
Amortization
of intangible   0.1                     0.1                 0.2                     0.2
assets
Restructuring   0.3                     0.2                 4.8                     0.5
charges
Non-GAAP
operating       (9.0)         (10.5) %  7.1        5.5   %  (16.1)        (9.0)  %  10.5       4.3   %
income (loss)
GAAP income     $  (0.5)      (0.6)  %  $ 9.9      7.7   %  $  (0.3)      (0.2)  %  $ 11.4     4.7   %
tax provision
Adjustment to
reflect pro     0.9                     (9.2)               1.3                     (10.1)
forma tax rate
Non-GAAP
income tax      0.4           0.5    %  0.7        0.5   %  1.0           0.6    %  1.3        0.5   %
provision
GAAP loss from
continuing      $  (10.2)     (11.9) %  $ (5.0)    (3.9) %  $  (23.9)     (13.3) %  $ (5.8)    (2.4) %
operations
Share-based     0.7                     1.8                 2.2                     3.3
compensation
Warehouse
consolidation   —                       —                   0.2                     —
costs
Amortization
of purchased    —                       0.1                 —                       0.3
technology
Transactional
taxes           0.6                     —                   0.6                     0.6
assessments
Amortization
of intangible   0.1                     0.1                 0.2                     0.2
assets
Restructuring   0.3                     0.2                 4.8                     0.5
charges
Adjustment to
reflect pro     (0.9)                   9.2                 (1.3)                   10.1
forma tax rate
Non-GAAP
income (loss)
from            $  (9.4)      (11.0) %  $ 6.4      5.0   %  $  (17.2)     (9.6)  %  $ 9.2      3.8   %
continuing
operations
Income (loss) per share from continuing operations
Basic:
GAAP            $  (0.17)               $ (0.08)            $  (0.39)               $ (0.10)
Non-GAAP        $  (0.15)               $ 0.10              $  (0.28)               $ 0.15
Diluted:
GAAP            $  (0.17)               $ (0.08)            $  (0.39)               $ (0.10)
Non-GAAP        $  (0.15)               $ 0.10              $  (0.28)               $ 0.15
Shares used in computing income (loss) per share from continuing operations
Basic:
GAAP            61.8                    60.0                61.3                    59.7
Non-GAAP        61.8                    61.2                61.3                    61.2
Diluted:
GAAP            61.8                    60.0                61.3                    59.7
Non-GAAP        61.8                    61.5                61.3                    61.4
ADJUSTED
EBITDA:
GAAP loss from
continuing      $  (10.2)     (11.9) %  $ (5.0)    (3.9) %  $  (23.9)     (13.3) %  $ (5.8)    (2.4) %
operations
Depreciation
and
amortization    2.1                     1.3                 3.5                     2.9
of property,
plant and
equipment
Interest        0.1                     0.2                 0.2                     0.5
expense
Share-based     0.7                     1.8                 2.2                     3.3
compensation
Warehouse
consolidation   —                       —                   0.2                     —
costs
Amortization
of purchased    —                       0.1                 —                       0.3
technology
Transactional
taxes           0.6                     —                   0.6                     0.6
assessments
Amortization
of intangible   0.1                     0.1                 0.2                     0.2
assets
Restructuring   0.3                     0.2                 4.8                     0.5
charges
Provision for
(benefit from)  (0.5)                   9.9                 (0.3)                   11.4
income taxes
Adjusted        $  (6.8)      (7.9)  %  $ 8.6      6.7   %  $  (12.5)     (7.0)  %  $ 13.9     5.7   %
EBITDA
(1) The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used
by us. Our non-GAAP income or loss from continuing operations excluded share-based compensation,
warehouse consolidation costs, amortization of purchased technology, transactional taxes assessments,
amortization of intangible assets, restructuring charges, and adjustment to reflect pro forma tax
rate. Adjusted EBITDA was determined by excluding depreciation and amortization on property, plant and
equipment, interest expense, provision for income taxes, and non-GAAP pre-tax adjustments, as set
forth above, from the GAAP income (loss) from continuing operations. We believe that the presentation
of these non-GAAP items provides meaningful supplemental information to investors, when viewed in
conjunction with, and not in lieu of, our GAAP results. However, the non-GAAP financial measures have
not been prepared under a comprehensive set of accounting rules or principles. Non-GAAP information
should not be considered in isolation from, or as a substitute for, information prepared in accordance
with GAAP. Moreover, there are material limitations associated with the use of non-GAAP financial
measures.
(2) Certain prior year period amounts are reclassified to conform to current period presentation.



Table 5
AVIAT NETWORKS, INC.
Fiscal Year 2014 Second Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
                                Quarter Ended           Two Quarters Ended
                                              December                December
                                December27,  28,       December27,  28,
                                2013                    2013          2012
                                              2012
                                (in millions)
North America                   $   33.8      $ 41.4    $   67.5      $ 80.1
International:
Africa and Middle East          26.0          63.9      63.0          112.9
Europe and Russia               10.0          9.2       18.6          21.6
Latin America and Asia Pacific  16.0          14.5      30.1          29.4
                                52.0          87.6      111.7         163.9
Total Revenue                   $   85.8      $ 129.0   $   179.2     $ 244.0





SOURCE Aviat Networks, Inc.

Website: http://www.aviatnetworks.com
Contact: Ned Hayes, Aviat Networks, Inc., (408) 567-7120,
Ned.Hayes@aviatnet.com; or Investor Relations: Peter Salkowski, Aviat
Networks, Inc., (408) 567-7117, Investorinfo@aviatnet.com
 
Press spacebar to pause and continue. Press esc to stop.